Business is booming for rideshare companies such as Uber and Lyft. But in some cities, taxi companies feel threatened and are trying to muscle rideshare services out of the market. Still, forceful competition isn’t the only thing rideshare drivers have to worry about. According to an article in Insurance Journal, personal auto insurance companies are trying to make sure they aren’t shouldering all the risks associated with rideshare driving.
As the article reports, each state across the nation must decide if and how it will regulate rideshare companies. Some states have banned the services outright. Other states, backed by the concerns of the personal auto insurance industry, are trying to pass legislation that will require rideshare drivers to carry a certain level of Commercial Auto Insurance. Why would a rideshare driver need both personal and commercial auto coverage? Let’s find out.
Why Do Some Small Businesses Need Personal & Commercial Auto Insurance?
First, let’s take a closer look at how rideshare services work. Anyone, for example, can become an Uber driver, as long as their application is accepted by the company. From there, you simply turn on the app, which connects you to nearby customers who need rides. In most cases, Uber drivers use their personal vehicles to transport riders – and that’s the problem.
Personal auto insurance policies specifically exclude (with few exceptions) coverage for commercial driving. In many ways, commercial driving is riskier, and personal auto insurance policies aren’t enough. For example, business driving is more likely to involve…
- Hauling or delivering goods.
- Extended periods of time on the road.
- Multiple passengers.
- Heavier vehicles capable of doing more damage.
That’s why Commercial Auto Insurance was invented. It’s specifically designed to cover the risks of business driving. Now, if an Uber driver (or your business) owned a vehicle that they only used for business purposes, this wouldn’t be an issue. The driver would need Commercial Auto Insurance, no question.
But most Uber drivers use their personal vehicles for transporting customers. And insurance companies are trying to decide when a person’s driving crosses the line from personal into commercial. As the Insurance Journal article outlines, there are three “periods” of an Uber driver’s service:
- When the Uber app is on and the driver looks for a rider.
- When there’s a match and the driver picks up the rider.
- When the rider is in the car and the driver transports them to a destination.
In some states, lawmakers want to require Commercial Auto Insurance coverage for all three periods – from the moment the app is on until the rider is dropped off at their destination. That is the best-case scenario for personal auto insurance providers – they don’t want to be stuck paying for accidents that happen while a driver is cruising and waiting for a rider, no matter how passive the commercial activity. But rideshare companies believe this would be too expensive and inhibit the insurance companies that design rideshare-specific coverage.
While the division between “personal” and “commercial” driving may not be clear for rideshare drivers, it’s usually more black-and-white for other types of small-business owners. If you use your personal vehicle for anything beyond driving to and from work, you’ll likely need a Commercial Auto Insurance policy in addition to a personal one.
(To learn more about this coverage, read “What Goes into a Quote for Commercial Auto Insurance?”)
Other Small Business Auto Risks: Your Employees’ Driving
Now might be a good time to remind you that your business can be held liable for all driving associated with your business – especially when your employees drive their own vehicles to run business errands.
When a small business starts out, it might not have the funds to purchase company cars, so employees might use their own vehicles to drive on the company’s behalf. In this case, a Commercial Auto Insurance policy won’t do you any good – it only covers cars that you own. But there is a policy that can cover the gap: Hired and Non-Owned Auto Insurance.
This policy covers your business’s liability expenses when accidents happen in your employees’ vehicles or vehicles that you rent for work.